First Data, VNU weaken with numbers; Realogy dips as debt exchange surfaces

By Sara Rosenberg

New York, Nov. 14 - First Data Corp. and VNU Group BV both saw their bank debt levels slide lower on Friday following the release of earnings results, although the softness may have been more a function of general market weakness than the company-specific news.

In other trading news, the bid side on Realogy Corp.'s term loan headed down during market hours, but again it was hard to tell whether the overall market tone was more of a culprit than the company's newly announced bond for second-lien loan exchange offer and warning of possible covenant non-compliance.

First Data trades down

First Data's term loan B debt gave up a few points in trading on Friday after quarterly results were posted, according to a trader.

The company's term loan B debt was quoted at 70½ bid, 72½ offered in the late afternoon, down from 72 bid, 74 offered on Thursday, the trader said.

"I didn't think the earnings were that bad. Loans are liquid, so when market goes down, people start to punt them," the trader remarked, adding that the cash market overall was off by about one to two points.

For the third quarter, First Data reported a net loss of $164.4 million, compared to a net income of $28 million in the third quarter of 2007.

Consolidated revenues were $2.164 billion, compared to $2.071 billion in the comparable period last year.

And, adjusted EBITDA was $693.6 million, compared to $650 million in 2007.

First Data is a Greenwood Village, Colo.-based provider of electronic commerce and payment services.

VNU retreats

Also coming out with earnings during the session was VNU, and like First Data, it was hard to tell whether the company's bank debt sold off because people were upset by the numbers or whether the softness in the general market was really to blame.

The term loan was quoted at 72 bid, 74 offered in the late afternoon on Friday, down from 74 bid, 76 offered, a trader told Prospect News.

"Earnings didn't come in that bad. Another one of those large liquid loans that seems to get smacked around," the trader added.

On Friday, Nielsen Co. BV (formerly VNU) said that for the third quarter, income from continuing operations was $42 million, compared to a loss from continuing operation of $101 million last year.

Revenues for the quarter were $1.26 billion, an increase of 6% over revenues for the third quarter of 2007 of $1.188 billion.

EBITDA for the 12-month period ended Sept. 30 was $1.356 billion.

As of Sept. 30, total debt was $8.467 billion, and cash balances were $325 million. Capital expenditures were $253 million for the nine months ended Sept. 30, compared with $185 million for the same period in 2007.

VNU is a Haarlem, Netherlands-based information and media company.

Realogy bid lower

Realogy's term loan weakened up on Friday after the company announced a slew of news, including a debt exchange offer and possible future covenant violations.

The term loan was quoted at 63½ bid, 65½ offered, down from previous levels of 64 bid, 66 offered, the trader said.

"News probably a non-event for the bank loans. Probably just half a point lower with the rest of the market," the trader remarked.

Late Thursday night, Realogy announced that it is inviting existing note holders to exchange some of their notes at a discount for up to $500 million in a new second-lien incremental term loan debt that is being obtained under the credit facility's accordion feature.

The second-lien loans will mature on April 15, 2014.

Note holders have until Dec. 11 to participate in the exchange offer, but if they participate by Nov. 26, they get a more advantageous rate, and each commitment must be for at least $250,000 of loans.

The company will accept notes in priority order - first, the $850 million 12 3/8% senior subordinated notes due 2015, then the $1.7 billion of 10½% senior cash pay notes due 2014, and lastly, the $582.2 million of 11%/11¾% senior toggle notes due 2014.

No more than $125 million can come from the senior subordinated notes and no more than $175 million can come from the toggle notes.

Realogy second-lien pricing

Realogy's proposed second-lien term loan debt will consist of a term loan C that will be used to refinance the senior cash notes and senior subordinated notes, and a term loan D that will be used to refinance the senior toggle notes.

Pricing on the term loan C will be Libor plus 1,400 basis points and pricing on the term loan D will be Libor plus 1,500 bps, with both tranches carrying a 2.5% Libor floor. However, the term loan C has a pricing cap of 18.5% and the term loan D has a pricing cap of 19.5%.

The company may elect to pay either 100% or 50% of the PIK component under the term loan D by capitalizing such interest to the unpaid principal amount of the loan. The aggregate amount of such capitalized interest payments, together with the aggregate unpaid principal amount of the second-lien loans, can't exceed $650 million unless the existing credit facility is amended to increase the maximum amount of permitted incremental term loans.

After giving effect to the new second-lien term loans and assuming the company only accepts commitments from holders of senior subordinated notes and senior cash notes, interest expense for the nine months ended Sept. 30 would have decreased by $19 million and for the year ended Dec. 31, 2007 would have decreased by $14 million.

Realogy may face covenant issues

Also, on Friday, Realogy said in an 8-K filing with the Securities and Exchange Commission that it could violate the senior secured leverage ratio or other covenants under its credit facility.

The company went on to say that potential covenant non-compliance would be a result of decreases in home sale sides and home prices.

In addition, the company warned that it "cannot predict how long the current volatility in the financial marketplace, decline in consumer confidence and current recessionary conditions will continue to affect home sales and prices."

Realogy is a Parsippany, N.J.-based provider of real estate and relocation services.

Cash falls

As mentioned above, the cash market in general was softer by about one to two points on the day as retail sales numbers were "horrible," a trader said.

The U.S. Census Bureau announced on Friday that retail and food services sales for October were $363.7 billion, a decrease of 2.8% from the previous month and 4.1% below October 2007.

Total sales for the August through October period were down 1.3% from the same period a year ago.

However, despite the retail sales numbers, in the loan market, paper was "getting evenly crushed," the trader said, explaining that the weakness was not specific to retail names.

For example, autos were down on Friday, with Detroit-based General Motors Corp. and Dearborn, Mich.-based Ford Motor Co. both seeing their term loans drop 1½ points on the day to 45 bid, 47 offered, the trader added.

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